Mendix on January 3, 2014
Recently, we welcomed best-selling author of “The Real Business of IT” and research scientist leading MIT’s Center for Digital Business, Dr. George Westerman, to a live webinar on ‘communicating the value of IT to the business.’ This webinar can be viewed on-demand here.
The format of the event was a question-and-answer session between Gottfried Sehringer, Mendix VP of Worldwide Marketing, and Dr. Westerman. Below is an edited transcript of their conversation.
Gottfried Sehringer: Thank you very much for joining us today. Let’s dive right in. First of all, I’m curious; your book, “The Real Business of IT” is about IT, but there’s nothing about technology in the book. It’s all about communication – what’s behind that?
So there’s a little bit of technology in there, but you’re right: it’s about technology and it is about communication. And this was kind of a surprise when we came into the research. I spent a lot of time with non-IT executives through this course that I have, and also through interviews that we did in research. What we found in our early studies is that the number one driver of their perception of value wasn’t from the technology; it was from whether they had effective oversight of IT. Whether they had a transparent view of what’s happening in IT, whether they knew what IT was providing, what role they needed to play, and what benefits they were getting. This, over and over again in our studies, showed up as important, and that’s when we realized there’s something really essential in learning how to communicate the right way.
Gottfried Sehringer: Indeed not technical, probably more important to the career of the CIO altogether – can you describe the framework of the book?
The important thing here is that the CIO is a leadership role, not a technical role. And as you move up to the leadership ranks, sure you need to learn how to run your organization well, but it’s also a whole different way of communicating because you’re no longer communicating about the technology, you’re communicating about how your organization is performing and how it’s helping the rest of the organization work. And there it’s about joint goals. It’s about how you’re helping other people. That’s a new communication method, and that’s often what people need to learn to do.
So there are steps. You asked about the framework. We found that in studying dozens of CIOs who turned their IT organizations from disrespected order-taker to strategic partner, tended to go through four steps: changing how you think about the organization, showing you do your job well, showing you help people do their job well, and then getting more jobs to do.
Gottfried Sehringer: So what are some of the typical mistakes you see CIOs make?
Well, this is the interesting thing about value traps. There are things that I grew up in IT learning to say, and there are things that I see IT executives do, that just get them in trouble. One, for example, is talking about IT as a cost of doing business. We know what you want to do to a cost of business. If you say I’m a cost of doing business, everyone else says “How do we reduce you?” That’s not the situation you want to get yourself in. If you say you’re the technology leader of the organization, you’re kind of saying, “When you want to talk technology, bring me into the conversation – but otherwise don’t.” So these kinds of ways of talking are ways that we learned how to talk, and they get in the way of actually being that true strategic partner you want to be. You want to find ways to avoid them.
Gottfried Sehringer: So you mentioned the term ‘value trap’ a few times, can you explain that and maybe give us some examples?
The idea of the value trap comes from the concept in management called the competency trap, and this is the idea that often when you’re faced with a new situation, people double down on what they know they’re good at. So sailing ship manufacturers faced with diesel engine boats added more sails to their ships that made them even less maneuverable in the face of their competition. This happens over and over again, and you want to get out of those competency traps. In IT it’s the same way: doubling down on how you learned how to talk when you were a low-level IT person, only gets you in trouble when you’re a high-level IT person.
Another example is what happens when things go wrong. Anybody in the service business knows that you don’t say “Hey, this is just what happens.” The right answer is “This should never happen and I’m going to do something about it.” This is one of those things that just requires thinking over and over again, and reinforcement over and over again. In many ways, it’s kind of a culture change and the best way I’ve seen a CIO take this to heart is anytime there’s a conversation going on in their business, they stop it when they say something the wrong way. They talk about “Hey, we’re technology people” – okay, let’s talk about that differently. “Hey, we’re a cost” – no we’re not a cost, we’re an investment in making the business work.” If you have any of your people that ever say, “If you don’t do it my way, I can’t guarantee the results” you have to stop that right away. Because the way people hear that one is “I don’t care about what happens to you.” These are all value traps.
There’s one that’s really interesting to me, though. Many IT organizations are out there saying the business is my customer. There’s some value in that, giving yourself a customer’s orientation, especially when things are really, really bad. But if I set you up to be my customer, I’m setting myself up to be the vendor. That’s not a partnership. We know what we do to vendors. In IT, we know especially what you do to vendors. You don’t want to put yourself in that position. So talking to business as a customer may get you started at the very beginning, but it’s not something you want to keep doing. You want to talk about IT as being an integral part of the conversation, and an integral partner in everything you do.
Gottfried Sehringer: That’s a great point, and I’m sure a lot of our listeners will pay attention to that because it’s certainly not something you hear very often. You mentioned already the fact that a lot of times IT has to say No, and we’ve all heard those jokes about the CI-No or the ‘land-of-no’ – any recommendations how to avoid that?
Well, one thing to do is to just not say flat-out no ever. Every time you say no, there ought to be a reason why you said no, and it ought to be followed up, if you can, with a better solution. One of the best CIOs I know was a CIO at an electric utility company, and people would come in with project requests and they’d say “I want to have this done and I want it to look like this.” And he knew it was the wrong way to go. But instead of saying No, he’d say “OK great, let’s take a look at that. I’ll come back in a month and we’ll run up the estimates on that.” But what he also did was run the estimates on that requests, along with two other requests that were better. So instead of saying “Here’s your idea, it’s a bad one” he’d say, “Here’s your idea, here are two better ones, which one do you want to do?” And that tends to work tremendously well for him. I think that’s what you want to do in IT also. If you got a flat-out no [type of request] try to avoid it, and at least give a reason for the No, but even better, give them a way to accomplish what they want without having to violate all your rules.
Gottfried Sehringer: Which types of tasks in IT organizations effect business value more than others?
So another thing that came out of this research with non-IT executives – we interviewed 150 or more of these people – was that the four tasks that were the most associated with value in their eyes, number one was transparency, but the others were about application development: doing a good job of needs identification and process and organization change. What that says to me is that the real value comes from developing applications better to get more value out of them. Once again that’s not a technical problem – it’s really about what value are you signing up for? Are you developing well, and then did you get the value you originally signed up to provide? We call this the virtuous cycle of IT value, and there’s as much management in there as technology.
Gottfried Sehringer: I’m glad you mentioned the value of application development. What impact do you think that has on the business?
Better application development? I think the idea of doing application development better has benefits all throughout. There’s another reason beyond our survey research to think that getting systems in and changing the business has the most value, and actually if you look at changing the way you run IT, let’s just say on average between two and five percent of revenue goes into IT. If you cut that in half, you’re generating one to two percent of revenue in savings. So developing processes – changing the business – is effecting the other 95% of the business, there’s just more territory to make change happen. So getting things developed better is a huge source of value, as long as you make sure you’re actually getting the benefits you signed up.
As part of this virtuous cycle of value, one of the things we looked at was what it takes to get through the process. In the book we call them value harvest reviews. That’s where it really becomes real. You go through and if you’re a business unit chief and you want money over a certain threshold, you go to the executive committee in IT and you say “I need three million bucks, and this will return ten million dollars over the next two years.” The next question is: How do you know that? And you have to say “I counted these measures and they’re going to move this far and it’s got this much value.” And then the next question is: Do you have everything else set up to make sure this is going to deliver? And you say “Yes, we thought about this and this and this.” And then the answer is almost always yes. Now the interesting part about this is that a lot of people will withdraw their request when they get those first questions, because they’re not ready. Now why would they withdraw their request? Because whenever the solution goes in, the CFO knows that you had promised 10 million dollars – that’s automatically in your numbers. On top of that, you have to get up next year and say “I took three, I promised you ten, here’s how much I actually delivered.” in front of the CFO and the rest of the executive team. Now you don’t want to repeat your mistakes more than once there. So the CIO got out of the CINo job by putting the process at the right level – the CFO was happy to run out, and the CFO had ways of making conversations happen that the CIO couldn’t.
Gottfried Sehringer: Very good. That actually might tie into my next question about measuring progress from a CIO perspective, but also from a business partner’s perspective. How do you measure progress? How do you know you’re doing the right thing as the CIO?
You know, there are people out there saying if you don’t talk about revenue, you’re just not an effective CIO. There are times when you want to talk about revenue, but there are a lot of times you want to talk about other things. What we found is that a tremendously useful way to talk in IT is about business process metrics, because if IT is going to affect business, it’s going to do it by business processes. And those repeat enough where you’ve got pretty good measures to how they perform. What’s happening in your supply chain, in your inventory turns, with your customer satisfaction in this process – those are things that people should be measuring already, and if you can do a before and after look at them, that’s where measuring progress is really useful for the outcomes.
Gottfried Sehringer: Absolutely. Now it might be a related question, maybe it’s a little further off from this topic, but we’ve seen this a lot that business “takes matters into their own hands” and they end up not talking to the CIO or their IT team. They just do what they need to do. Do you have recommendations for the CIO on how to deal with that?
That’s a tough one. I think the first thing you want to do is ask yourself why that is happening. If people are saying they’re doing it because IT is just too slow, that’s something you might want to do something about. And you know, speeding up application development, speeding up your governance processes – that’s the way to do that. If they’re doing it because you said No to the request, you have to ask: Was it an appropriate No that you gave them? And then there are also times when people are going to do what they want to, because they want to. We were doing studies on these new digital technologies and I heard five times in 50 interviews, “Officially, I’ve had it not allowed it in the enterprise, but half the executive team has it.” So you’re not going to stop that one, but you do want to think through in IT, are the processes that you’re doing creating this shadow IT and what can you do to fix that.
Gottfried Sehringer: Shadow IT is of course one of the extreme cases. The other part is partnering with business to get things done, or enabling the business to do more, without losing the control of IT. That’s certainly something we see a lot with our customers.
Often developing the systems is the smallest part of the value you’re going to get. It’s important; you’ve got to get it right, you’ve got to do it fast, but it’s also about the organizational change that goes with it. It’s whether the organization is ready to change their processes. One guy I talk to, the CIO at a large almost billion-dollar grocery chain, was complaining he had spent millions of dollars putting these systems in place, and nothing had happened in the purchasing department because he could not get the people doing purchasing to change the way they were working because there was new data there. He had just wasted his money. He was trying to figure out how to get the organization to change. So why am I saying that – because often when projects fail, it’s not the technology failing, it’s what the rest of the organization is not doing. And if you can put the transparency in early, people know what roles they’ve got to play. And you can get to the point where the organization doesn’t sign off until all the roles have been done, and that’s where you want to get going.
You know one of the things you mentioned was speeding up application development. We can speed up application development so much faster, and you absolutely want to do that because so many times people complain about things being too slow in IT. So speeding up application development can be a tremendously useful thing to do, especially if you can do it to the point where those other organizational processes begin to speed up too.
Gottfried Sehringer: We’ve seen that as the really exciting pivotal moment in customer projects: when the business all of the sudden has to slow down the rest of the project team because they need to and want to contribute. Now a different dimension to this, in today’s world of digital and mobile and social that we all hear about – what does that mean for the CIO? Does that change anything?
I think there are a couple things. One is that it’s happening – so you’ve got to get ready for it. We know about the consumerization of IT and we’ve talked about shadow IT and how this all fits in. You’ve got to be ready for it. You’ve got to have a plan for getting there. And what I’m hearing even more than before is that people were unhappy with IT before, they’re really unhappy with IT now. So it’s also a push to drive your transformation. The difference is this: with so much of the digital happening in marketing, where before they might not be happy with IT, but they kind of had to live with you, with so much being driven out of marketing now, if they’re not happy with you they’ll just go around you. We’re seeing the emergence of an organizational role called the chief digital officer. And it’s a natural role for many CIOs to take – but not a lot of CIOs are entering that role. So one of the things you want to think about is, as you take governing technology to governing all of digital, how can you make yourself part of that conversation so even if you’re not running the whole thing, you’re an essential part of making it happen.
Gottfried Sehringer: That’s a very interesting point, and that goes with my next question here on your book in general and maybe your research over the last few years – what are some of the biggest surprises you found when you wrote the book?
So the biggest surprise I found, you know we had known from the early research that this idea of transparency was important, but I had never understood just how powerful it is. I didn’t know whether transparency was just an effect of well-run organizations. But it helps with so many things. It helps to shape the conversation that you’re having with the business, so you can shape it first of all to address the issues that you’re not performing; you show your value for money. And then that you’re a good executive, so you get invited into more conversations. If you shape the project conversation right, you show that you’re helping them every step of the way. So yes, you’re shaping the conversation in your role, but I didn’t realize how much transparency also improved the performance of IT in itself. I thought that was separate process. Yet when Intel first put up its first picture about how bad they were, business already knew it, the IT people didn’t realize how bad they were, and within three years they were much better. I’ve seen this even to the extent where a company went through and started marking up what parts of the data center were associated with what parts of the business. Suddenly operations performance improved. Suddenly people weren’t managing boxes, they were managing parts of the business. So that was the biggest surprise, that transparency has such a big impact not only upwards, but also downwards.
Dr. Westerman goes on to answer questions from the live audience, which can be viewed on-demand. We’d like to thank Dr. Westerman for joining us and providing an incredibly valuable perspective on the role of CIOs and IT teams in the enterprise, and how they can better communicate IT’s value to business partners.
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